Swan warns states on royalties rise

WA Treasurer Troy Buswell says the federal government should honour a recommendation that all royalties be credited for MRRT purposes. Photo: Bohdan Warchomij

Gemma Daley and Mark Ludlow

Treasurer Wayne Swan is making clear his objections to the states seeking to bolster budgets with higher ­mining royalties, which in net terms can further reduce the federal government’s already disappointing income from the new minerals resource rent tax (MRRT).

“It’s the states hiking up royalties that are hurting the mining industry,” a spokesman for Mr Swan said. “That’s because royalties are inefficient; they hurt struggling, low-profit mines because they’re imposed regardless of whether a mine is profitable.”

Mr Swan said Queensland Resources Council chief executive Michael Roche had said before this year’s state budget that its decision to raise royalties had made “further job losses seemed inevitable”.

“States that hike up royalties are putting thousands of mining jobs and the industry at risk,” the Treasurer’s spokesman said.

He noted the Gillard government had asked the Nick Greiner-led review of goods and services tax distribution to examine incentives states had to increase royalties, and was considering the final report’s recommendations before releasing it.

GST review believed to back royalties cap

Queensland, NSW and South Australia said reported planned changes to the tax by Mr Swan would harm Australia’s investment appeal. The GST Distribution Review is understood to recommend a cap on refunds to mining companies for royalties they pay state governments.

The change would stop states jacking up royalty rates and expecting the federal government to cover the extra cost for BHP Billiton, Rio Tinto and other mining companies – a move taken by Queensland’s Liberal-National government.

Mr Swan’s spokesman said he was considering the GST report and that the states would hurt the mining industry if they increased royalties.

Miners said any change to the tax would overturn the original agreement, struck by Mr Swan and Prime Minister Julia Gillard with large resources companies in 2010.

When the earlier resource super profits tax was released, the Government Solicitor signalled there would be a constitutional problem in capping state royalties because it could discriminate against or give preference to certain states.

queensland treasurer says swan on hunt for revenue

Queensland Treasurer Tim Nicholls said Mr Swan must immediately rule out new restrictions on the mining tax.

Forecasts of revenue from the tax were slashed by a third in the recent budget update, to raising $9.1 billion over the next four years.

“He designed a tax that failed to deliver any revenue to the Commonwealth and now he’s looking for ways to make the states foot the bill,” Mr Nicholls said. “I call on Mr Swan to come clean with the people of Queensland. Does he intend to penalise them for his mistakes?”

A BHP Billiton spokesman said the tax was working in the way it was designed, which was to generate less revenue when commodity prices fell.

“Fluctuations in price, costs and capex or cyclical slowdowns are part of the industry and the MRRT is designed to accommodate the rise and fall of this,” BHP said.

NSW Treasurer Mike Baird said the state had increased royalties to cover the cost of the carbon tax.

“States have always had the right to raise royalties,” Mr Baird said. “We are principally seeking compensation from the federal government, not the mining industry.”

West Australian Treasurer Troy Buswell said Mr Swan must honour a statement made by the government in March that it “supports the recommendation that all current and future royalties be credited” for MRRT purposes.